What it is:
Guaranteed issuance refers to an insurer’s requirement to sell a product to a customer regardless of health status, age, gender, or other factors that might affect the customer’s use of health care or prospect of death.
How it works (Example):
Let’s assume that John Doe starts his own business selling garage doors. He hires an employee, Ralph. John and Ralph have families and want to purchase health insurance. Typically, insurers prefer to create employer-sponsored health insurance programs for employers with at least 50 employees. The average premium is $1,000 per month.
However, a few carriers offer guaranteed issuance policies, which means that those issuers will definitely sell an employer-sponsored policy to John. Often there is no waiting period or health screening. There is also no limit, however, to how much the insurance company can charge for guaranteed-issue policies, because the carrier must bear the higher risk that the people it is insuring are sick or are more likely to get sick. For that reason, the premium for John’s policy is $2,000 per month.
Guaranteed issue policies also exist for individual coverage, which means that the carrier agrees to sell policies to people with pre-existing conditions.
Many life insurance carriers market guaranteed-issue policies, which means that all customers qualify for the coverage regardless of their life expectancy.
Why it Matters:
Some states require insurers to offer guaranteed-issue health policies to small businesses and sometimes sole proprietors. Though expensive, guaranteed issue policies are often better than no coverage at all, and they are especially an opportunity for people with high health care costs to obtain coverage.